Information technology stocks came under heavy pressure on Tuesday after US-based EPAM Systems cut its current quarter and full-year revenue and profit outlook.

In a see-saw session, the 30-share BSE Sensex and Nifty managed to close in the green, but Nifty IT index closed 1.88 per cent lower. However, the BSE Smallcap edged up 0.42 per cent and the Midcap index gained 0.29 per cent.

All the 10 stocks part of Nity IT index closed in the red, with Persistent Systems (down 4.31 per cent), Coforge (3.84 per cent) and Mpahsis (3.49 per cent), witnessing a sharp slide. HCL Technologies, Wipro, TCS and Infosys fell between 0.95 per cent and 1.8 per cent.

Guidance cut

EPAM has cut its CY2023 revenue growth outlook again and now expects a 2 per cent constant currency revenue decline at the mid-point of the guided band. The company has now cut its CY2023 revenue growth expectation by about 13 per cent over two consecutive updates, said Kotak Institutional Equities. The guidance cut has been attributed to continued client caution on ‘build’ spends, slower-than-assumed rate of pipeline conversion and some reduction in total pipeline.

“The slowdown in discretionary spending would have implications on Indian IT, with Q1-FY24 likely to be weak. We believe the recent run-up in the sector has been ahead of fundamentals,” it said..

‘Slowdown warning’

“A gauge of Indian IT stocks declined the most in seven weeks after a US-based peer — EPAM Systems — cut its revenue growth forecast, warning of a slowdown in deal-making,” Deepak Jasani, Head of Retail Research, HDFC Securities, said.

ICICI Securities, which analysed SaaS (Servicenow, Atlassian, Snowflake, Salesforce, Workday, etc.) and digital companies (EPAM, Globant, Endava), said clients are focusing on cost optimisation and reduction of total cost of ownership (can be achieved by consolidating SaaS platforms). “This would likely be a net positive for Indian IT services providers, as many of them have built integration capabilities around the large SaaS vendors who are likely to benefit from consolidation,” it said.

Sectoral indices that declined on the BSE were, BSEIT (1.66 per cent), BSETeck (1.51 per cent), Metal (0.45 per cent), Oil &Gas (0.08 per cent) and FMCG (0.02 per cent). However, sectoral indices such as BSE Realty (1.25 per cent) Auto (1.10 per cent), Commodities (0.74 per cent), Capital Goods (0.61 per cent), and Healthcare (0.59 per cent) ended in the green.

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